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August 8, 2013

Retreat, Hell! Downsizing Need Not Be a Dirty Word for Advisors

During the first months of the Korean War in 1950, Major General Oliver P. Smith’s 1st Marine Division was surprise attacked by the North Koreans and the Chinese Army and surrounded at the Chosin Reservoir. Gen. Smith reversed the direction of his Marines so quickly that it caught the North Koreans by surprise, and the 1st Marines broke out of the trap and made an orderly withdrawal back to the coast. The highly decorated Gen. Smith’s leadership (he was eventually promoted to four-star general) saved not only his division, but the U.S. Army’s entire X Corps comprising four additional divisions. When later asked if his actions at Chosin didn’t violate the Marine Corps motto of never retreating, Gen. Smith famously replied: “Retreat, Hell! We were just advancing in a different direction!”

With our penchant for celebrating winners, our culture tends to attach a stigma to retreating, as if it represents failure. Yet as General Smith demonstrated at Chosin, and countless other examples from military and business history have shown retreats can rank among the most heroic of actions.

Many business owners (including financial advisory firm owners) suffer from the stigma of retreating. To make matters worse, we constantly read in our trade publications about how “bigger is better” and “lifestyle firms are not very valuable.” So owners continue to grow their firms, hire people, make more money and become even more successful, all for the price of what? I don’t know, perhaps happiness?

Let me give you an example: A year ago, one of my clients told she had been working with a therapist for several years because as she put it, “...my happiness in life seems to be dropping at the same rate as my success and the money I make increase...” During these shrink sessions, she said it “came to light” that she needed to change the direction of her business. From the outside, she had what I would consider a very successful practice. A natural-born leader, she spent 15 years building a great ensemble firm with very productive advisor employees and was now producing around $2.5M in revenue. She makes over $500,000 a year, lives in a big house, has nearly everything she ever wanted, takes trips around the world and has beautiful offices. But she told me that she’s come to realize that all this “success” isn’t making her happy.

“I’ve done what all you ‘gurus’ tell us to do: become a leader, add more people, get bigger and grow a larger practice,” she said. “But you know what? I’m unhappy. I don’t know why I cannot just be ‘normal’ and appreciate the success I have? I was happier when my firm was smaller. When I had longer meetings with clients, cleaned my own damn house, and had a little too much to drink at dinner without the worry of a client walking in the door.”

She told me she wanted me to help her scale back her practice and her lifestyle; “I’d be happy living on $200,000 a year, living in a smaller house, working out of less expensive offices, and selling a piece of my firm to the employees. So I’d like you to come up with a plan to make that happen for me.”

As her consultant, you can image my shock. She’s pretty young and I estimate has a good 20 years more of work to go. I even thought for a hot second she might be drunk. She wasn’t. After several phone conversations where I played devil’s advocate with her, I finally realized she was serious and not willing to compromise on her decision. It wasn’t the easiest plan I have ever put together, and there were many hard decisions we made, but we created a plan and went to battle—by retreating.

The interesting thing to me was that her biggest problem wasn’t scaling back and implementing the plan; it was psychological. She feared what other people might think of her. “I’m afraid how people—my clients, my community, my friends, other advisors—will view my downsizing,” she said. “What will people think of me if I don’t look successful? Would they think I had financial problems? Would they see me as a failure?”

After many discussions, we concluded that there were only two groups of people whose opinions really mattered to her: her family and her clients. The community’s view wasn’t important given her level of unhappiness, her friends would likely enjoy more time with her and other advisors would either get it, or not.

She also realized that she was talking about doing for herself exactly what she had been doing for her clients all these years: helping them to live the lives they wanted. Now it was her turn. That’s exactly what she decided she would tell them: she wanted to create a lifestyle that makes her happy, and continuing to work with them would be part of that lifestyle, just in a different way. Hard to imagine her clients wouldn’t understand that logic.

I once heard Mark Tibergien say, “Every business owner must have a personal definition of success.” I am guessing my client is one example of what he may have meant. No matter how you define it, success is personal. In some cases, bigger is not better. As one of my friends so bluntly put it, “Hell! It’s not retreating, it’s just advancing to the rear.”

The bottom line is that certain people don’t need, want or desire certain levels of success and money no matter how much other people think they should have it and obtain it.

As my client taught me, it’s heroic to achieve success, but it can be more heroic to choose happiness by having the courage that requires you to advance in another direction.